Azerbaijan�s external debt reached $ 21-22 billion - expert

Baku / 19.02.18 / Turan: Azerbaijan's external debt is 21-22 billion dollars, and not 10 billion as the authorities say, said an economic expert, executive secretary of the Republican Alternative Movement, Natig Jafarli. In an interview with the Cətin sual program ("Difficult issue"), he said that the method of counting the external debt of the Azerbaijani government does not meet international standards. So, the official statistics takes into account the volume of borrowings and used funds. However, does not take into account loans that will be received in the future already under signed contracts. This is a wrong approach.

According to international practice, external debt is not only received and expended, but also future borrowings, plus the debts of companies received under state guarantees. In Azerbaijan, in official statistics, the debts of companies obtained under state guarantees are not included. Although, the state company SOCAR made all its foreign borrowings under state guarantees. The same concerns debts, "Azerenerji" OJSC, Azersu OJSC, and most of their debts are taken under state guarantees.

Based on international practice, Azerbaijan's foreign debt currently stands at $ 21-22 billion, which is almost 60% of the country's GDP, the expert said. Commenting on the Finance Ministry's statement that the reason for the growth of the external debt in 308% was the restructuring of the debts of the "International Bank of Azerbaijan", Jafarli drew attention to the fact that the external obligations of the IBA are 3.3 billion dollars, but the payment of funds has not yet begun. At the same time, 1 billion of this amount is the money of the State Oil Fund of Azerbaijan. Therefore, the main reason for the growth of external debt is the attraction of loans from international financial institutions for the projects of gas transportation projects TANA and TAP, Jafarli said.

Among the donors and potential lenders are the EBRD, the IMF, the World Bank, and the Asian Development Bank. Crediting of these projects and development of Shah Deniz-2 will continue until 2020, and the volume of external debt may increase by another 15-20%. Most of the proceeds from the sale of gas from Shahedniz-2 will be used to repay loans with interest. In general, the volume of investments in the South Gas Corridor project (Shahdeniz-2, TANA and TAP) will amount to 46 billion dollars of which 25 billion will be financed by Azerbaijan.

Taking into account the fact that 10 billion cubic meters of gas will be supplied to Europe by SCG from 2020. meters per year and under the current conjuncture the price will not exceed $ 250 per thousand cubic meters. Therefore, with a 20% share of Azerbaijan, the country's revenues will amount to $ 500-600 million, and most will be used to repay loans. From a commercial point of view, the SCC was not very effective. But from a political point of view, this is a good project, because Azerbaijan managed to get support from Western institutions.

This year, for the first time, 12% of the state budget expenditures will go to pay off foreign debt and in 2020. deductions for these purposes will reach a peak. This will affect social spending and investment in the construction sector.

According to Jafarli, in 2016-2017 years. without state guarantees it was possible to receive foreign loans for 3-4 billion dollars. But some of them were returned in 2016. Remains an order of $ 2.5 billion of foreign debt obligations of international banks.

Usually, foreign capital is attracted to the country in 3 ways: direct investments in the economy, investments in the securities market and loans. What is the balance in Azerbaijan between these 3 sources of attracting foreign capital?

Answering this question, Jafarli noted regretfully that there are no conditions for direct foreign investment in Azerbaijan. Azerbaijan's membership in the WTO is important for potential investors, which ensures the application of international rules of the game.

In addition, investors are interested in the legal and judicial system. Where there are no independent courts, there are virtually no direct investments. Azerbaijan is not a WTO member, ending the negotiations on accession without delay.

There are no independent courts in the country either. Therefore, during the years of independence, there were no direct investments in Azerbaijan with the exception of the oil and gas sector. In the oil and gas sector, investors for guarantees achieved ratification of their contracts by the parliament.

There is practically no stock market either. There are no trades on the securities market and foreign investors are not showing interest. There is some interest only in the Finance Ministry's bonds. Therefore, it is hardly possible to talk about attracting foreign investors through privatization, recalling scandals around scams to attract investors and expulsion from the country of several foreigners who invested heavily in Azerbaijan.-03C06--